Focusing student support on younger learners

Budget 2013 focuses on providing the maximum possible level of support for students in the early years of tertiary study and those from low-income families, while ensuring the system is sustainable for taxpayers.

The Government has today announced a number of changes to student allowances to continue to rein in the big increases in expenditure by the previous government.

“As a result of policy changes by the previous government, expenditure on student allowances increased dramatically– from $385 million in 2007/08 to $649 million in 2011/12 (a 69 per cent increase) and this was simply not sustainable,” Tertiary Education, Skills and Employment Minister Steven Joyce says.

“The changes we have made in Budget 2012 and 2013 will reduce that cost back to a projected $528 million annually in 2016/17.

“We have been determined to achieve a sustainable level of student support, while maintaining interest-free student loans and targeting additional support to students who need it most.”

The key changes to student support include:

• Removing student allowances eligibility for those aged 65 years and over from 1 January 2014.
• Reducing the lifetime limit for student allowance eligibility for those aged 40 and over from 200 weeks to 120 weeks from 1 January 2014.
• Extending student loan and allowance stand-down period for permanent residents from two to three years from 1 January 2014.
• Implementing a package of initiatives to improve overseas-based borrower student loan repayments.
• Changing the calculation of the cost of lending in the Student Loan scheme to a more accurate “year of lending” basis

“These changes collectively aim to improve repayments from overseas-based borrowers, increase personal responsibility for debt, and ensure the student allowance system becomes more affordable,” Mr Joyce says.

“120 weeks of student allowance for people over 40 will cover three years of study. Once they have completed three years of study, they will be able to borrow interest-free from the student loan scheme,” Mr Joyce says.

“In regards to student loans, the changes we have made in the last four Budgets have been successful in reducing the cost of the student loan scheme to taxpayers. The cost of borrowing has reduced from around 48 cents in the dollar in 2009, to an estimated 39 cents in the dollar as at 31 March 2013.  At the same time, the loans continue to be interest-free for borrowers.”

The student support changes in Budget 2013 will provide operating savings of $29.6 million in 2013/14.

“New Zealand continues to have one of the most generous student support systems in the world, with students having access to interest-free student loans and, for many, student allowances as well,” Mr Joyce says.

“The changes we have made to student support over the past three years have allowed us to free up money that we can invest in improving the quality of the tertiary education that we provide.”

Money saved by the student support proposals will allow the Government to invest more in science and engineering, complete the closing of the funding gap between public and private institutions, and support more students in the system to reach the Better Public Services target of 55 per cent of 25 to

34-year-olds having a qualification at Level 4 or above.